John Stossel: It is a myth that 'austerity' does not work
So say the Big Spenders.
With a condescending sigh, they explain that Europe made deep cuts in government spending, and the result was today's high unemployment. "With erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far," writes Paul Krugman in The New York Times.
That doesn't stop leftists from complaining about cuts or stop Europeans from protesting announced austerity plans. But if austerity means spending less, that hasn't happened.
Iceland was hit by bank collapses — but government ignored street protests and cut real spending. Iceland's budget deficit fell from 13 percent of gross domestic product to 3. Iceland's economy's is now growing.
Around the same time, Japan went the other way, investing heavily in the public sector in an attempt to jump-start its economy, much as the U.S. did with "stimulus" under President Obama. The result? Japan's economy stagnated.
In the U.S., politicians imply spending limits would be "cruel" because vital programs are "cut to the bone." But we are nowhere near bone.
Consider this family budget:
• Annual Spending: $35,370
• New Credit Card Debt: $10,870
• Existing Debt: $167,600
When I show that to people, they laugh and say the family is "irresponsible." They are dismayed when I point out that those are really America's budget numbers, with eight zeros removed:
• Spending: $3,537,000,000,000
• Deficit: $1,087,000,000,000
• Debt: $16,760,000,000,000
Then people say: "That's terrible! We have to balance the budget."
Actually, we don't need to "balance" it. We just need to slow spending growth to about 2 percent a year, so the economy can gain on our debt. But politicians won't do even that.
C'mon. Federal bureaucrats spend $3.7 trillion! But most people can't think of anything to cut?
But make no mistake: As people my age retire and demand Medicare, America will eventually go broke.
John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "No They Can't: Why Government Fails, but Individuals Succeed."
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